OTS CONCLUDES NEW YORK PREDATORY LENDING LAW PREEMPTED AS TO FEDERAL SAVINGS BANKS
On January 30, 2003, the Office of Thrift Supervision (“OTS”), in response to a letter from a federal savings association or savings bank (“FSB”), concluded that federal law preempts the application of the New York Predatory Lending Law (“NYPLL”) to FSBs. OTS Letter P‑2003‑2 from Carolyn J. Buck, Chief Counsel (January 30, 2003) (“OTS Letter”). The NYPLL imposes requirements on the terms of credit, loan‑related fees, disclosure and advertising and mortgage origination, refinancing and servicing in connection with high‑cost home loans. OTS Letter at 1-2.
In its response, the OTS concluded that the provisions of the NYPLL that purport to regulate the terms of credit, loan‑related fees, disclosure and advertising, and mortgage origination, refinancing and servicing are preempted by federal law from applying to FSBs and their operating subsidiaries. Id. at 1. In addition, the OTS concluded that the NYPLL’s compliance scheme is preempted for FSBs. Id. at 5. In support of its conclusion, the OTS indicated that the Home Owners’ Loan Act (“HOLA”) and regulations issued by the OTS occupy the field of regulation for lending activities of FSBs. Id. at 3. The OTS indicated that such federal regulation is “exclusive leaving no room for state regulation, conflicting or complementary.” Id. The OTS specifically cited to Section 560.2 of the OTS Regulations in support of its conclusion. Id. Section 560.2 generally provides that FSBs may extend credit as authorized under federal law without regard to state laws that purport to regulate or otherwise affect their credit activities. Id. Section 560.2 also sets forth specific types of state laws that are preempted, such as state laws on terms of credit, loan‑related fees, disclosure and advertising, and processing, origination, servicing, sale, purchase, investment and participation in mortgages. Id. at 3‑4. The OTS indicated that many of the provisions of the NYPLL would fall within these areas, and thus would be preempted. Id. at 3-4. According to the OTS, such preemption is necessary because subjecting FSBs to the burdens of complying with a hodgepodge of conflicting and overlapping state lending requirements would undermine the federal objective of permitting FSBs to exercise their lending powers under a single set of uniform federal laws and regulations. Id. at 4.
The OTS’ conclusion regarding the applicability of the NYPLL is consistent with a recent letter it issued on January 21, 2003, in which it concluded that provisions of the Georgia Fair Lending Act purporting to regulate the terms of credit, loan‑related fees, disclosures or the ability of a creditor to originate or refinance a loan, are preempted by federal law from applying to FSBs and their operating subsidiaries. OTS Letter P‑2003‑1 from Carolyn J. Buck, Chief Counsel (Jan. 21, 2003).
Jeff Langer and Chuck Gall